McDaniel v. SunTrust Bank (In re McDaniel)

• Decision Date: 19 December 2014
• Docket Number: Adversary No. 13–04013.,Bankruptcy No. 12–41231–jtl.
• Citation: 523 B.R. 895
• Parties: In re Leslie McDANIEL, Debtor. Leslie McDaniel, Individually and as Representative of her Bankruptcy Estate, Plaintiff, v. Suntrust Bank, Suntrust Mortgage, Inc., McCalla Raymer, LLC, Foxfire Acres, Inc., The United States by and through the Internal Revenue Service, The State of Georgia (Represented by the Department of Revenue), The Grogan Group, LLC d/b/a Grogan & Grogan, and The Columbus Consolidated Government, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Georgia

523 B.R. 895

In re Leslie McDANIEL, Debtor.Leslie McDaniel, Individually and as Representative of her Bankruptcy Estate, Plaintiff

v.Suntrust Bank, Suntrust Mortgage, Inc., McCalla Raymer, LLC, Foxfire Acres, Inc., The United States by and through the Internal Revenue Service, The State of Georgia (Represented by the Department of Revenue), The Grogan Group, LLC d/b/a Grogan & Grogan, and The Columbus Consolidated Government, Defendants.

Bankruptcy No. 12–41231–jtl.

Adversary No. 13–04013.

United States Bankruptcy Court, M.D. Georgia, Columbus Division.

Signed Dec. 19, 2014.

Entered Dec. 22, 2014.

Fife M. Whiteside, Fife M. Whiteside, P.C., Columbus, GA, for Plaintiff.

Monica K. Gilroy, Dickenson Gilroy LLC, Alpharetta, GA, Cater C. Thompson, Jones, Cork and Miller, LLP, Barbara Parker, U.S. Attorneys Office, Macon, GA, Stephen G. Gunby, Page Scrantom, Sprouse, Tucker & Ford, P.C., James D. Patrick, Columbus, GA, Stephanie Kay Burnham, Georgia Department of Labor, Audrey Seidle Eshman, Swift, Currie, McGhee & Hiers, LLP, Atlanta, GA, for Defendants.

Grogan & Grogan, pro se.

MEMORANDUM OPINION

JOHN T. LANEY, III, Chief Judge.

This matter comes before the Court on Motions for Summary Judgment (the “Motion”) filed by defendants McCalla Raymer, LLC (“McCalla”), SunTrust Bank and SunTrust Mortgage, Inc. (collectively “SunTrust”). McCalla filed its motion individually, while SunTrust Bank and SunTrust Mortgage filed a joint motion and also adopted the factual and legal arguments put forth in the McCalla motion. Together, the motions for summary judgment filed by McCalla and SunTrust address substantially all allegations raised in the Plaintiff's Complaint. The Court heard oral arguments on the Motion on October 22, 2014, in Columbus, Georgia. The Court has determined each issue raised in both the McCalla and SunTrust motions in this consolidated opinion. For the reasons set forth below, the Court grants in part and denies in part the Defendants' Motion.

Summary Judgment Standard

In dealing with motions for summary judgment, Federal Rule of Civil Procedure 56 is made applicable to adversary proceedings in bankruptcy cases by Federal Rules of Bankruptcy Procedure 7056. Pursuant to Rule 56, summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c) ; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Like a district court, a bankruptcy court must determine that there are no genuine issues of material fact and accept all undisputed facts as true in order to find that summary judgment is warranted as a matter of law. Gray v. Manklow (In re Optical Technologies, Inc.), 246 F.3d 1332, 1334 (11th Cir.2001). An issue is “material” if it affects the outcome of the case under the applicable law. Redwing Carriers, Inc. v. Saraland Apartments, 94 F.3d 1489, 1496 (11th Cir.1996). A factual dispute is genuine if the evidence would allow a reasonable fact finder to return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). With that standard in mind, the Court makes the following findings of fact and conclusions of law.

Factual Background

I. The Botched Foreclosure and the Foxfire Suit

Plaintiff, Leslie McDaniel (herein referred to as “Plaintiff” or “McDaniel”), is a co-debtor on a promissory note (the “Note”) dated February 13, 1992, evidencing a loan in the original amount of $106,400, in favor of Trust Company Bank of Columbus, N.A. (“Trust Company”). The Note was secured by a Deed to Secure Debt (the “Security Deed”) executed in favor of Trust Company and encumbering property located at 2627 Meadowview Drive, Columbus, Georgia (the “Property”). The evidence shows this loan was subsequently modified on May 1, 1997. As part of her 2005 divorce, Plaintiff was to assume responsibility for payments on the Note and the Security Deed.

Plaintiff subsequently defaulted on the Note and Security Deed. As a result of Plaintiff's default a foreclosure was commenced in the name of SunTrust Mortgage, which advertised the property for a sale to occur on November 2, 2010. Unfortunately, however, SunTrust Mortgage was not the holder of the Security Deed. Instead, SunTrust Bank, as successor by merger to Trust Company, was the actual holder of the Security Deed, and at the time of the foreclosure there had not been an assignment of the Security Deed from SunTrust Bank to SunTrust Mortgage.

At the November 2, 2010, foreclosure sale, Foxfire Acres, Inc. (“Foxfire”) submitted the highest bid for the Property in the amount $126,000. Following the foreclosure sale Foxfire learned through a title examination that the holder of the Security Deed was actually SunTrust Bank, the successor by merger to Trust Company, rather than the foreclosing entity SunTrust Mortgage. After the title issues were discovered Foxfire engaged counsel to attempt to clear up the problems with the title or to get a refund of the bid price.

To that end, counsel for Foxfire contacted McCalla, which had served as counsel for SunTrust Mortgage during the foreclosure proceedings. Beginning on January 8, 2011, counsel for Foxfire sent a series of letters to McCalla notifying it that there were problems with the title to the Property. On March 2, 2011, after not receiving a response from McCalla, counsel for Foxfire e-mailed Adam Silver, an attorney with McCalla and the head of the firm's foreclosure department, notifying him of the January 8, letter and of the defects related to the title of the Property. Unhappy with McCalla's response, or lack thereof, counsel for Foxfire sent two additional letters to Mr. Silver notifying him of Foxfire's intention to assert a claim against McCalla and SunTrust Mortgage. The second of these letters was received by McCalla on April 29, 2011. At his deposition Mr. Silver acknowledge receipt of the letters from Foxfire and stated that he had forwarded them to McCalla's litigation department. In November 2011 Foxfire filed suit against McCalla and SunTrust Mortgage in the Superior Court of Muscogee County (the “Foxfire Suit”). Plaintiff, as well as SunTrust Bank, are not parties to the Foxfire Suit. Both McCalla and SunTrust Mortgage filed answers denying that the foreclosure had failed. At the time of this ruling, the Foxfire Suit is still pending.

II. McDaniel Bankruptcy

On November 1, 2010, the day prior to the foreclosure sale, Plaintiff voluntarily moved out of her home. When she left, Plaintiff left behind certain property items because she was unable to make arrangements for storage of those items. In late 2011, Plaintiff received a tax notice related to the foreclosed property. After receiving the tax notice Plaintiff contacted the Muscogee County Tax Commissioner's (“Tax Commissioner”) office, and was informed that the foreclosure deed had not been recorded, and that the tax records still showed her to be the owner of the Property. Following her conversation with the Tax Commissioner's office, Plaintiff contacted McCalla several times, but spoke only briefly with clerical staff. Eventually, however, in January 2012, Plaintiff sent an e-mail to Mr. Silver, a partner at McCalla, which read as follows:

Mr. Silver,

Attached is a copy of a 2011 property tax bill [I] received last week. This property was owned by me from 1988–November, 2010, and the mortgage was through SunTrust. The property was foreclosed upon in November, 2010, and sold on the courthouse steps. I contacted the tax office and was told that the property has not been transferred to anyone yet, and advised that I get in touch with the law firm that handled the foreclosure to correct this problem. I was told that a FI FA would be issued by February 1st against me even though I didn't own this property at all during 2011.

Please advise.

[McDaniel Aff. Ex 2]. Mr. Silver replied to Plaintiff's e-mail that “[w]e will look into this immediately.” This is the only evidence of direct contact between any of the Defendants and Plaintiff. At the time of Mr. Silver's e-mail to Plaintiff, the Foxfire Litigation was pending in the Superior Court of Muscogee County. Mr. Silver, nor anyone from McCalla or SunTrust, ever informed Plaintiff of the Foxfire Litigation or the problems with the November 2, 2010, foreclosure.

On December 21, 2012, in an attempt to deal with the debt secured by her home and the lack of foreclosure on the home, Plaintiff filed a chapter 13 bankruptcy. After the filing of the bankruptcy case, counsel for Plaintiff learned of the Foxfire Litigation. Plaintiff filed a Chapter 13 Plan proposing to require SunTrust to either properly foreclose the property or allow her to sell it. SunTrust objected to confirmation of the plan, asserting that the November 2, 2010, foreclosure sale was valid and therefore Plaintiff had no interest in the Property. SunTrust's objection to confirmation in Plaintiff's bankruptcy mirrored its position in the Foxfire Litigation—that the November 2, 2010, foreclosure was valid. Counsel for Plaintiff contacted counsel for SunTrust in an attempt to resolve the confirmation dispute. Counsel for Plaintiff also sent a notice, as required under Fed. R. Civ. P. 9011, asking SunTrust to discontinue its position regarding the validity of the foreclosure. Unable to reach a resolution, Plaintiff brought a motion for sanctions pursuant to Rule 9011 and also brought a motion to sell the Property. Plaintiff then filed this adversary proceeding on October 17, 2013, against all parties which had a possible claim to any interest in the Property, including SunTrust Mortgage, SunTrust Bank, McCalla, and Foxfire. [Compl., ECF No. 1].

In August 2013, counsel for McCalla tendered to Foxfire the sum of $126,000, an amount equal to the Foxfire bid price....